Hidden Gems in the Tech Market: Exploring Small Companies to Invest In Right Now

While most retail investors chase blue-chip giants, a compelling opportunity lies in the smaller players of the tech industry. Small companies to invest in—particularly those in the technology sector with market capitalizations between $250 million and $2 billion—often deliver outsized potential returns that established firms simply cannot match. The key is identifying which promising small-cap stocks have genuine momentum behind them.

Amplitude: The Data Analytics Challenger Poised for Recovery

Amplitude (NASDAQ: AMPL) operates in a crowded but essential space: advanced analytics software that tracks how users interact with digital products. While larger competitors dominate through sheer brand recognition, Amplitude differentiates itself by offering superior features, enhanced transparency, and greater user control.

The company faced headwinds recently. Revenue growth decelerated sharply from 2022 levels as customers who had over-invested during the zero-interest era pulled back during contract renewals. Additionally, the company severed business relationships with Russian customers due to geopolitical sanctions, creating temporary Q3 pressure.

However, management’s recent strategic pivot shows promise. By simplifying the sales pathway from free to premium tiers, Amplitude is positioning itself for accelerated growth. The balance sheet tells a reassuring story: roughly 30% of the company’s market cap sits in cash reserves with virtually no debt. Free cash flow has remained positive throughout the past year. Trading at an enterprise value-to-sales ratio of just 2.5, Amplitude appears reasonably valued compared to peers. For patient investors, the recovery narrative could generate meaningful returns if Wall Street’s sentiment shifts.

SoundHound AI: Voice Technology Capturing Industry Momentum

SoundHound AI (NASDAQ: SOUN) delivers AI-powered voice solutions across multiple industries, positioning itself at the intersection of automation and customer experience enhancement. The company’s partnerships span automotive (collaborating with Honda, Hyundai, and Jeep on voice-activated systems) and quick-service restaurants (working with Papa John’s, Chipotle Mexican Grill, and Jersey Mike’s on AI-assisted ordering).

The financial trajectory speaks volumes. Most recently reported quarterly revenue reached $13.5 million, representing 54% year-over-year growth. The trailing 12-month revenue figure stands at $55.5 million, compared to $46 million in the prior year period. While profitability remains elusive and free cash flow hasn’t turned positive, the company maintains a fortress balance sheet: $200 million in cash against only $4 million in debt.

Growth-oriented investors with appetite for volatility should recognize that SoundHound AI operates in a rapidly expanding sector. The automation of customer service through voice technology represents a genuine industry tailwind. That said, this remains a higher-risk proposition unsuitable for conservative portfolios.

Innodata: The AI Software Play Breaking Through

Innodata (NASDAQ: INOD), a lesser-known name despite decades in the public markets since 1993, has emerged as an unexpected beneficiary of the artificial intelligence boom. Its low-code software platform enables enterprises to harness both traditional and generative AI for process automation, task delegation, and model training—ultimately freeing human workers for higher-value activities.

Despite competing against established giants like Accenture and Globant, Innodata’s generative AI capabilities have attracted impressive clients: five of the mega-cap technology companies now have master service agreements in place with the firm. For a company with a market cap barely exceeding $470 million, this represents a significant validation.

The financial inflection is real. During the first half of 2024, revenue climbed to $59 million, up 54% from the same 2023 period. More importantly, the company posted earnings of $975,000 in the first two quarters of 2024—a dramatic turnaround from the $2.9 million loss recorded in H1 2023. Stock performance reflects this momentum, with gains exceeding 90% year-to-date and surging more than 1,000% over the past five years.

The forward price-to-earnings multiple of 35 appears reasonable given the revenue acceleration trajectory. Admittedly, small companies to invest in carry inherent risks; should the generative AI sector experience a slowdown or major clients diversify to competitors, downside pressure could emerge. However, investors who believe in the secular AI trend and Innodata’s positioning could see substantial appreciation.

The Risk-Reward Calculus for Small-Cap Tech Investors

Deploying $1,000 across small-cap technology stocks requires acknowledging both the opportunity and the danger. These companies offer liquidity risk, earnings volatility, and limited analyst coverage. Yet history demonstrates that transformative returns often originate from smaller enterprises during their growth inflection points.

The three companies examined here—representing different angles on artificial intelligence adoption—demonstrate that opportunity exists within the small-cap universe. Success requires conviction in secular trends, patience through volatility, and recognition that not every position will succeed. Portfolio diversification across multiple small positions, rather than betting heavily on any single stock, represents a prudent approach for those allocating capital to this segment.